Self-employed retirement plans Bakersfield, CA. The independence of running your own company in Bakersfield, CA is one of the greatest advantages of being self-employed. That said, this freedom sometimes brings with certain challenges, especially when it comes to building your retirement fund, as you don't have access to retirement programs through an employer. Only 13% of self-employed individuals have a workplace retirement plan, but many should consider understanding their retirement options. In addition to enjoying a more comfortable retirement, working with a financial advisor in Bakersfield, CA to set up your self-employed retirement plan offers significant tax advantages that help both you and your business to thrive.
Few Bakersfield, CA investment consulting and retirement planning firms truly grasp the challenges faced by self-employed individuals quite like Correct Capital. The father of our founder was a small business owner himself (learn more about our story here), and our firm have a rich history of supporting entrepreneurs with their retirement planning needs. We know that your business and retirement aspirations go far beyond simple financial figures, and we strive to provide personalized solutions that reflect your objectives. Continue exploring to find out about your self-employed retirement plan options in Bakersfield, CA, or reach out to Correct Capital at 877-930-401k or contact us online to consult with a small business financial advisor in Bakersfield, CA today.
Why Bakersfield, CA Self-Employed Individuals Should Have a Retirement Plan
Retirement plans for self-employed individuals help prepare you for the future, they also deliver real benefits today. From flexible contributions to significant tax savings, partnering with a financial advisor in Bakersfield, CA enables you to customize your retirement plan to fit your specific needs.
Flexibility That Fits Your Income
If your income changes over time, a plan like a SEP IRA or Solo 401(k) gives you the flexibility to adjust how much you save:
- Customizable Contributions: Save extra during successful years and cut back when revenues are down, so your plan works with your financial situation.
- Roth Options: Opting for a Roth Solo 401(k) lets you handle taxes upfront, so you can withdraw without tax penalties in the future—a smart decision if you believe your tax rate to be higher in the future.
Save Money on Taxes
Self-employed retirement plans deliver powerful tax benefits:
- Tax-Deductible Contributions: Contributions to a SEP IRA lower your taxable income, allowing you to keep more of your income.
- Tax-Deferred Growth: Investments grow tax-free until withdrawal, providing your money more time to accumulate.
- State-Specific Incentives: Based on your location, you might access additional deductions as a business owner. These regional incentives help make these plans even more beneficial.
- Retirement Savings Contributions Credit (Saver’s Credit): Eligible individuals can claim a tax credit of up to 50% of the first $2,000 they contribute a retirement plan, cutting down your tax bill even more.
Protect Your Savings With Smart Investments
Creating a stable future requires more than how much you save—it’s also determined by your investment strategy:
- Diversified Portfolios: Distributing your investments across varied stocks, bonds, and alternatives is a smart way to minimize exposure to risk while helping to grow your retirement fund.
- Emergency Back-Up: Pairing your retirement plan with a business emergency fund prevents you from using your retirement funds during tough times and risking extra costs.
Plan for the Future of Your Bakersfield, CA Business
Retirement planning also helps you think through what’s next with your Bakersfield, CA business:
- Selling Your Business: For those considering a sale, retirement accounts like SEP IRAs and Solo 401(k)s remain your personal assets and are not part of the sale. These accounts offer the steady income you’ll need later on. Keep in mind that while the sale of a business usually creates a capital gain, deposits into these plans are capped at annual limits (e.g., a maximum of $7,000 for IRAs or up to $70,000 for Solo 401(k)s, including catch-up contributions, according to plan rules).
- Minimizing Taxes: Using retirement contributions wisely helps lower the taxes you might face when you pass on your business.
- Succession Planning: If you’re passing the business on, your nest egg ensure the funds you need through the transition. You can also seek advice from a financial advisor who specializes in succession planning and retirement accounts to help with taxes on the sale.
With the proper savings strategy, you manage your financial future, lower your tax bill, and establish a strong framework for both your retirement and your business goals.
Why Start a Self-Employed Retirement Plan in Bakersfield, CA Now?
There’s no denying that time is one of the most valuable factors when it comes to saving for retirement. Starting early not only helps you grow a larger nest egg but also lowers the stress of saving aggressively in the future. Here’s why it is beneficial to start now:
The Cost of Waiting
Waiting to start your retirement fund can have a significant impact on the amount you’ll have when you reach retirement age. The biggest reason is compound interest—the powerful process where your investments grow, and those returns, then, accumulate even more returns. The more time your money has to grow, the more significant the benefit of this growth.
Example: Alex and Taylor are both self-employed professionals. Both of them want to save $500,000 for retirement by age 65:
- Alex begins contributing $5,000 annually at age 30.
- Taylor postpones starting contributions to age 40 but contributes $7,500 annually to catch up.
By age 65, using a projected 7% annual return:
- Alex contributes $180,000 and accumulates $691,184.39*.
- Taylor contributes $195,500 but achieves a total of only $474,367.78*.
How Early Contributions Grow
Even modest contributions made consistently often create significant growth. Here’s a simple scenario showing the power of compound interest:
- Starting at age 25: By investing $200 per month in a retirement plan with an average annual return of 7%, you’ll end up with $497,303.29* by age 65.
- Starting at age 35: Contributing the same $200 per month would result in only $235,412.97* by age 65—a difference of over $260,000, simply due to a 10-year delay.
The earlier you begin, the less effort required each year to achieve your retirement goals.
*The numbers shown in this scenario are estimates calculated using NerdWallet’s Compound Interest Calculator, with the assumption of a 7% annual return. Annual deposits were multiplied by the number of years to estimate total contributions. These examples are intended as illustrative examples and cannot predict actual future outcomes. Your individual results may differ based on elements like market conditions, fees, and your unique situation. Be sure to speak with a financial advisor for guidance tailored to your needs.
Take Control of Your Financial Future
If you’re self-employed in Bakersfield, CA, it can be tempting to put more emphasis on reinvesting in your business rather than saving for retirement. However, beginning a plan now enables you to:
- Take advantage of tax-deferred growth or tax-free withdrawals down the road.
- Take advantage of flexible contributions that adapt to your income.
- Establish a safety net that offers peace of mind, no matter how your business changes.
Starting early, the less you’ll be required to worry about playing catch-up later in life. Saving for retirement now means gaining control over your financial future and allowing yourself the freedom to turn your attention to your dreams—both for your golden years and your Bakersfield, CA business.
Types of Self-Employed Retirement Plans
A variety of retirement savings options available for those working for themselves in Bakersfield, CA, each providing its own pros and cons. A financial advisor can help you understand the advantages and disadvantages of each option and identify the one ideal for your needs. In most cases, your self-employed retirement plan options in Bakersfield, CA consist of:
Traditional or Roth IRA
Plan Overview: Individual Retirement Accounts (IRAs), as explained here, represent retirement savings vehicles that offer key tax perks. In a conventional IRA, you can usually deduct your contributions from taxable income, and earnings grow without immediate taxation, but money taken out during retirement are subject to income tax. In contrast, with Roth IRAs, you contribute from post-tax earnings, but retirement withdrawals that qualify, including earnings, are not taxed. In both cases, withdrawals are penalty-free if you are at least 59½.
Eligibility: Unlike 401(k)s, which are employer-sponsored, traditional and Roth IRAs are open to those with taxable earnings.
Contribution Limits: For 2025, annual contribution limits for IRAs remain $7,000, or $8,000 if you qualify for catch-up contributions.
Simplified Employee Pension Plan (SEP IRA)
Plan Overview: The Simplified Employee Pension IRA offers a way to save for retirement that permits those who are self-employed to save a percentage of their net business profits. Contributions can only be made by an employer, so, as a self-employed individual, you (the employee) are limited to contributions from the employer role above the 25% you (the employer) allocate. If you have employees, it's required to contribute the same amount for them as you do for yourself. It's your choice whether to contribute a set monetary value or a percentage of wages to employee accounts. A SEP IRA works well for companies with fluctuating revenue streams. In contrast to some alternatives, SEP IRAs are free of expensive setup or ongoing fees.
SEPs function like standard IRAs, where contributions are made with pre-tax money and withdrawals are taxed as income.
Eligibility: Both employers and self-employed individuals can open a SEP.
Contribution Limits: Contribution limits for employees in a SEP IRA must not exceed:
- 25% of compensation, or
- $70,000 for 2025
As a self-employed person, the contribution you can make is based on a special calculation.
Solo 401(k)
Plan Overview: The Solo 401(k), also called an Individual 401(k) or one-participant 401(k) plan, is a retirement savings plan designed for businesses without employees or where the only employee is a spouse. These plans function similarly to standard 401(k) plans, and enable contributions as both an employer and an employee with pre-tax money. This provides more savings than SEPs or IRAs; however, the extra savings options can be balanced by more limited investment options. With this type of plan, you can make either traditional or Roth deferrals, which offer the same tax benefits as their IRA contribution counterparts.
Eligibility: Only business owners and their spouses can set up and contribute to a solo 401(k).
Contribution Limits: If you are self-employed with a solo 401(k) plan, you are allowed to make two types of contributions:
- Employee contributions of up to 100% of your self-employed earnings, up to the annual contribution limit. The contribution limits for 2025 include $23,500, or $31,000 for those aged 50 and above, or $34,750 for individuals aged 60-63 in 2025.
- Contributions as an employer (as an employer) must not surpass 25% of your adjusted self-employment income, which is calculated as net profits less half of your self-employment tax and the deferrals you made.
Total contributions are capped at $70,000, or $77,500 if you're over age 50 (in 2025), $81,250 if you attain age 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: The defined benefit plan represents a type of retirement plan that provides a set amount to business owners upon retirement. Unlike defined contribution plans mentioned above, this plan is not influenced by market performance, but enables participants to determine what they'll have in retirement. This option is recommended for wealthier professionals who aim to accumulate a substantial amount for retirement and are willing to make sizeable contributions. Contributions grow tax-free until withdrawal, and withdrawals incur taxes as income during retirement.
Eligibility: Entrepreneurs managing a one-person company or with less than five employees can open an individual defined benefit plan, but it's typically suggested for individuals aged 50+ who generate a minimum of $250,000 yearly. Typically, good candidates for defined benefit plans include:
- Business owners or partners who desire to contribute more than $70,000 (or $77,500 if over age 50)
- Companies already contributing 3-4% and are willing to do more
- Businesses showing consistent profit patterns
- Partners or owners over age 40 who desire to "catch up" or accelerate the retirement savings
Contribution Limits: The cap on contributions must be determined by an actuary based on your financial situation, age, and savings targets. Allowable contributions are adjusted each year.
The Importance of a Financial Advisor in Bakersfield, CA for Your Self-Employed Retirement Plan
Working with a financial advisor in Bakersfield, CA specialized in self-employed retirement plans is an invaluable resource for self-employed individuals. They bring the skills needed to navigate the complexities of retirement planning and craft a personalized approach that aligns with your goals. Your advisor in Bakersfield, CA will evaluate your financial situation, identify your risk preferences, and guide you in making informed decisions about saving and investing for retirement. Part of what we do for you involves:
- Assist in selecting a plan that aligns with your objectives and circumstances
- Customize the plan to your needs even further
- Formalize a plan in writing in accordance with IRS guidelines
- Arrange a trust plan for assets
- Ensure you comprehend the plan's terms
- Monitor and adjust your plan to keep it aligned with your goals
- Deliver continuous support and financial insights as you continue on the road to retirement
- Maximize what you receive in retirement by making the most of your social security
Self-Employed Retirement Plans in Bakersfield, CA: Correct Capital's Process
Self-employed individuals in Bakersfield, CA who don’t have the time or expertise to oversee their own retirement planning on their own can become overwhelmed when faced with their options. At Correct Capital, our Bakersfield, CA financial advisors manage the lion's share of your retirement strategy for you, working to make meeting your future savings targets as easy as possible for you. We are here to assist you in setting up your self-employed retirement plan in four simple steps:
- Schedule a Call: It only takes 20 minutes, a member of our advisor team can determine if our services align for you and your business. This short conversation lets us understand what you're looking for with no obligation or extensive time commitment on your part.
- Gather Information: If we both decide to move forward, we'll ask for information, including how many employees you have (if any), your present financial standing, and your future objectives. This helps us create a custom plan designed just for you.
- Review Your Plan: After we put together a plan based on the information you provide, we'll meet with you and go over your plan in detail to ensure you understand it and understand how it best correlates to your needs.
- Implementation and Monitoring: After we agree on your plan, we'll put everything in place so you can start saving. As time goes on, we'll have regular meetings and track your progress to make sure it remains aligned with your goals.
Our Bakersfield, CA financial advisors and retirement plan consultants are fiduciary advisors, which means they are legally and ethically bound to do what's in your best interest.
Other financial advisory services we offer in Bakersfield, CA include:
- Financial Planning for Business Owners
- Comprehensive Financial Planning
- Retirement Income Planning
- Investment Planning
- Retirement Financial Planning
- Independent Financial Advisor
- Roth Conversion
- Investment Management
- 401(k) Audit
- High-Net-Worth Wealth Management
Call Correct Capital for Your Self-Employed Retirement Plan in Bakersfield, CA
To you, your business is more than "just a business", and your Bakersfield, CA financial advisors must deliver more than simply sound financial advice. With Correct Capital, we take the time to get to know our clients and their businesses to create tailored self-employed retirement plans. We offer all our Bakersfield, CA clients our I.O.U. promise: all of the advice you get from us will be independent, objective, and unbiased. To take the first step on your self-employment retirement plan, reach out to Correct Capital at 877-930-401k or contact us online.
